Market Place; 'Death Service' Stocks on Rise

By Vartanig G. Vartan

Published: August 12, 1981

SOME analysts wax enthusiastic over prospects of a ''baby boomlet'' in the 1980's and the good things it can mean for companies that have products to cater to this demographic trend. But there also is a growth trend of a sort at the other end of the age scale.

The death rate per 1,000 persons, according to the Bureau of the Census, was 8.8 from 1975 to 1979. Reflecting the nation's aging population, estimates call for this rate to rise to 9.5 per 1,000 in the 1980-1985 period and to continue increasing for the rest of this century.

Looking into the investment implications, Merrill Lynch favors the shares of one company, while Smith Barney, Harris Upham has another favoite in this field.

Similarly, Steven C. Leuthold, a consultant to the Minneapolisbased firm of Piper, Jaffray & Hopwood, gives high marks to one of the stock market's micro-groups, namely ''death services.'' He rates propects for the relative market performance of this sector over the next nine to 12 months as ''outstanding.'' This is the same fourstar billing Mr. Leuthold gives to other groups, such as automobile parts and clothing manufacturers.

Hillenbrand Industries appears to be the beneficiary of accelerating profits, according to the Merrill Lynch Market Letter.It describes Hillenbrand as a diversified producer of coffins, luggage and equipment for hospital rooms, with a prominent share of each of these markets.

''The company reported a decline of 26 percent in its share earnings for the first quarter of fiscal 1981 and an increase of 12 percent in the second quarter,'' the publication said. ''We look for gains of about 25 percent in the third quarter, almost 40 percent in the fourth quarter - which ends Nov. 30 of this year - and about 23 percent in fiscal 1982.''

''Further out,'' it went on, ''we think that earnings will increase at an average annual pace of 15 percent or so over the next five years.''

On a per-share basis, this works out to projected profits of $5.50 in fiscal 1981 and between $6.50 and $7 in fiscal year 1982. Hillenbrand, the nation's largest manufacturer of finished burial coffins, earned $5.03 a share in fiscal 1980. Its Batesville coffin division accounted for 52 percent of sales that year and 61 percent of operating profits.

A $50 million expansion program is under way at this division. Standard & Poor's said: ''The program, to be completed by 1985 and financed internally, would double capacity to over 800,000 caskets annually through construction of new plants and modernization of older ones.''

The Value Line Investment Survey, another leading advisory service, noted that Batesville is widening its lead over the competition. ''The number of United States casket makers has declined 35 percent in the past 15 years and about 400 manufacturers are left,'' it said. ''The company's planned doubling of capacity will likely sound the death knell to many others in the field.''

For the next 12 months, Value Line estimates that Hillenbrand will be an average market performer. However, the final word from the advisory service is: ''Take the long view of this stock.''

Incidentally, Hillenbrand has raised its dividend in each of the last eight years. Hillenbrand last traded on the New York Stock Exchange Monday, when it closed at 42 3/8, down 5/8.

The Service Corporation International, another Big Board stock, was recommended last November by Smith Barney, Harris Upham as one of its ''special situations and smaller growth stocks.'' The issue has performed handsomely since that time, but the firm still considers Service Corporation ''an attractive niche company,'' according to Roland E. Morena, an analyst.

''I continue to view it as a sound investment in an attractive area for the next 10 years,'' Mr. Moreno said in an interview. As a leading funeral service organization, Service Corporation operates funeral homes, cemeteries, crematories, and flower shops in the United States and Canada.

Adjusted for a 5-for-4 stock split earlier this year, the company earned $2.14 a share for its fiscal year ended April 30, 1981. Mr. Moreno expects profits of about $2.60 a share for fiscal year 1982. Looking ahead to the following year, he said that ''earnings on the order of $3 a share are a reasonable preliminary expectation.''

He cited such favorable factors as ''the expected mortality rise, further successful acquisitions and expanded related activities.'' Yesterday, the stock closed unchanged at 21 3/4 on the Big Board. A third company in this field is IFS Industries, which operates funeral homes, cemeteries and crematories. It earned $1.26 a share in the fiscal year ended March 31. Yesterday, on the American Stock Exchange, its shares dipped 1/4, to 9 5/8.